Utility Dive: ERCOT weathers steamy August, but could Texas become a winter-peaking system?

Dive Brief:

• The Texas electric grid faced tight reserve margins heading into this summer, but new data shows it weathered the season with no blackouts or brownouts, and only two calls for conservation.
• There were many days with tight conditions, and demand response helped the grid operator to keep the lights on. Prices in the Electric Reliability Council of Texas (ERCOT) hit their $9,000/ MWh price ceiling for wholesale electricity for just three hours over the summer. Despite the attention-grabbing prices, observers say it is a sign the state’s energy-only market is working as designed.
• One group has an idea for addressing ERCOT’s tight markets. Austin-based Pecan Street, which manages a neighborhood electric test bed, says electrification could shift Texas to a winter-peaking region through the use of heat pumps.

Dive Insight:

The steep ERCOT price spikes are a feature, not a flaw, according to renewable energy advocates keeping an eye on Texas markets. The grid operator will hear an assessment of its summer market operations next Tuesday, but has released new data, including a Summer 2019 Operational and Market Review.

“Bottom line, ERCOT’s new data shows that the Texas competitive power market worked exactly as it was designed to this summer,” John Hall, EDF’s director of regulatory & legislative affairs, told Utility Dive in an email. “Despite fossil fuel interests predicting a crisis, this is the second year in a row the state survived tight reserve margins without any blackouts or brownouts.”

ERCOT officials knew they faced a tight balance heading into the summer but it wasn’t until August that the system received any real test. At one point, the grid operator reported more than 5 GW of unplanned outages, at a time when wind production also dipped.

The system entered summer with a planning reserve margin of about 8.6%, but expects that to rise in 2020 to 10.5%, and then 15.2% in 2021 as more generation comes online.

The new summer analysis indicates the tightest market conditions “frequently occurred earlier than time of peak demand.”

“We’re seeing tight conditions occur earlier in the day than during the traditional peak hours, primarily due to wind ramping down in the early afternoon and not picking back up again until closer to peak,” an ERCOT spokesperson told Utility Dive in an email.

ERCOT published its summer analysis Oct. 2, ahead of an Oct. 8 Board of Directors meeting where the results will be presented. Also this week, Pecan Street’s research considered the impacts of electrifying single-family residential heating in ERCOT’s service area.

Shifting from gas to electricity for winter heating “would result in increased winter electricity demand peaks,” the report found. “When combined with the reduction in summer peak demand, the increase in winter peak demand would flip Texas from a ‘summer peaking’ to a ‘winter peaking’ system.”

“To fully decarbonize, we must eventually eliminate carbon emissions from our homes,” according to Joshua Rhodes, study co-author and a partner at IdeaSmiths, the firm that completed the underlying analysis. “This work shows that it is possible to do so in Texas with today’s technology and points toward the possibility of doing so in other locations as well.”

ERCOT summer peak demand “would drop dramatically,” due to the use of more efficient heat pumps acting as air conditioners, the study found.

According to research, changing Texas to a winter-peaking region would have policy and practical implications. Generator maintenance schedules would need to be revised, and there would be changes to Transmission Cost Allocations.

“Anything that can be done to reduce strain on the grid — including the use of heat pumps — is going to be positive for the environment and consumers,” said Hall.

Air conditioning accounts for 50% of the state’s energy use during peak summer demand, he said.

“The real solution to Texas’ energy needs all fit under the umbrella of demand-side resources: distributed resources, energy efficiency, demand response,” said Hall. “This is low-hanging fruit with huge energy-saving potential.”